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Discounting and Divergence of Opinion

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Author Info
Elyès Jouini () (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX)
Jean-Michel Marin (INRIA Futurs - SELECT - INRIA - Université Paris Sud - Paris XI, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)
Clotilde Napp (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris Dauphine - Paris IX)

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Abstract

The objective of this paper is to adopt a general equilibrium model and determine the socially efficient discount factor, risk free rate and discount rate when there are heterogeneous anticipations about the growth of the economy as well as heterogeneous time preference rates. Among others we tackle the following questions. Is the socially efficient discount factor an arithmetic average of the individual subjectively anticipated discount factors? More generally, can the Arrow-Debreu prices, the risk free rates, the subjectively expected socially efficient discount factors and discount rates be obtained as an average of the individual subjectively anticipated ones? Can beliefs dispersion be analyzed as a sort of additional risk or uncertainty leading to possibly lower discount rates? Is it socially efficient, when diversity of opinion is taken into account, to reduce the discount rate per year for more distant horizons? If so, what is the trajectory of the decline?

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Paper provided by HAL in its series Working Papers with number halshs-00176636_v2.

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Date of creation: 16 Sep 2008
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Handle: RePEc:hal:wpaper:halshs-00176636_v2

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Keywords: discount rate; risk free rate;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Christian Gollier & Richard Zeckhauser, 2005. "Aggregation of Heterogeneous Time Preferences," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 878-896, August.
  2. Dybvig, Philip H & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1996. "Long Forward and Zero-Coupon Rates Can Never Fall," Journal of Business, University of Chicago Press, vol. 69(1), pages 1-25, January. [Downloadable!] (restricted)
    Other versions:
  3. Elyes Jouini & Clotilde Napp, 2007. "Consensus Consumer and Intertemporal Asset Pricing with Heterogeneous Beliefs," Review of Economic Studies, Blackwell Publishing, vol. 74(4), pages 1149-1174, October. [Downloadable!] (restricted)
    Other versions:
  4. Yvan Lengwiler, 2005. "Heterogeneous Patience and the Term Structure of Real Interest Rates," American Economic Review, American Economic Association, vol. 95(3), pages 890-896, June. [Downloadable!]
  5. Diego Nocetti & Elyès Jouini & Clotilde Napp, 2008. "Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience," Post-Print halshs-00365980_v1, HAL. [Downloadable!]
  6. Gollier, Christian, 2002. "Time Horizon and the Discount Rate," Journal of Economic Theory, Elsevier, vol. 107(2), pages 463-473, December. [Downloadable!] (restricted)
  7. Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1992. "Waiting to Invest: Investment and Uncertainty," Journal of Business, University of Chicago Press, vol. 65(1), pages 1-29, January. [Downloadable!] (restricted)
  8. Li, Chuan-Zhong & Lofgren, Karl-Gustaf, 2000. "Renewable Resources and Economic Sustainability: A Dynamic Analysis with Heterogeneous Time Preferences," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 236-250, November. [Downloadable!] (restricted)
  9. Sinclair-Desgagne, Bernard & Gabel, H. Landis, 1997. "Environmental Auditing in Management Systems and Public Policy," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 331-346, July. [Downloadable!] (restricted)
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  10. Ben Groom & Cameron Hepburn & Phoebe Koundouri & David Pearce, 2005. "Declining Discount Rates: The Long and the Short of it," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(4), pages 445-493, December. [Downloadable!] (restricted)
  11. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December. [Downloadable!] (restricted)
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  1. Elyès Jouini & Clotilde Napp, 2008. "How to aggregate experts discount rates: an equilibrium approach," Working Papers halshs-00394035_v1, HAL. [Downloadable!]
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This page was last updated on 2009-11-28.


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